Global Markets Update - Monday, 6 January 2020

Posted on 06 Jan 2020

The FTSE All-World Index rose 24% over 2019, its best year since 2009. US stocks closed 2019 with their strongest annual gains since 2013. European shares rose 26% over the year, their largest annual gains since the introduction of the euro in 1999. In the UK, the FTSE 100 of larger companies recorded its biggest annual gains since 2016, while the FTSE 250, seen as a better reflection of the UK economy, surged 25% for the year in its best performance since 2013. Chinese stocks ended the year over 34% higher, their best run since 2014, while Australian stocks recorded their strongest annual gain since 2009, rising 18% over the year.

While global stocks rose on the first day of trading in the new year, they slid as geopolitical tensions rose sharply after the US used a drone to kill Iran's top military leader, Qasem Soleimani, in Iraq. Meanwhile, oil prices rose, as did safe haven assets such as gold, bonds and the Japanese yen.

Global Market Update - 06-01-20

The FTSE 100 rose 0.5% over the fortnight. The IHS Markit/CIPS purchasing managers’ index for the manufacturing sector sank to 47.5 in December, compared to 48.9 in November. This indicates that manufacturing activity is shrinking at the fastest rate for seven years. The IHS Markit/CIPS purchasing managers’ index for the construction sector dropped to 44.4 in December from 45.3 in the previous month.

The S&P 500 closed the two-week period 0.6% higher. Having started the new year with a fresh record high, the S&P 500 subsequently slipped on news of the killing of Iran’s top military leader. Minutes of the latest FOMC policy meeting showed that Federal Reserve appeared more confident in their stance on interest rates, noting that risks to the global economy were easing and considering the possibility that the US labour market could get even better. The ISM manufacturing purchasing managers' index fell to 47.2 in December 2019, from 48.1 in November and the lowest reading since June 2009.

The FTSEurofirst 300 closed the two-week period unchanged.

The Nikkei 225 slid 0.7% over the two weeks.

Pacific Basin
China’s central bank started the new year with a move to improve economic growth by pumping $115bn into the country’s financial system. The CSI 300 of Shanghai- and Shenzhen-listed companies subsequently rose to the highest level since February 2018. The Caixin-Markit China manufacturing purchasing managers’ index (PMI) survey for December slipped slightly to 51.5, compared to 51.8in November which was the highest level in three years. China’s official manufacturing PMI, which surveys larger, state-owned companies, held steady at 50.2 in December. 

The yield on 10-year US Treasury closed the two-week period at 1.81%, having closed 2019 at 1.91%. The yield on the 10-year German Bund ended the year at -0.19% but closed the two-week period at- 0.29%. By the end of 2019, the total amount of global bonds trading on negative yields had shrunk to $11 trillion, compared to $17 trillion at the end of August.
Heightened geopolitical tensions caused gold to climb to $1,549 an ounce, near to a four-month high. Meanwhile, oil prices moved back above $68 a barrel.


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